As part of Europe’s ‘Omnibus Simplification’ directive, the European Financial Reporting Advisory Group (EFRAG) had the daunting task of radically simplifying the European Sustainability Reporting Standards (ESRS) – the framework companies use to comply with the EU’s Corporate Sustainability Reporting Directive (CSRD) – in just 8 months.

Typically, standard setting can take 18 months or more for just one issue. Simplifying twelve complicated standards in eight months while ensuring the data will be ‘decision useful,’ interoperable with other standards, and aligned with the aspirations of the CSRD is herculean.  

Yesterday, I moderated an event in Brussels where EFRAG unveiled its simplified standards. The new standards received broad support as a measured approach that reduces companies' reporting burden while maintaining the goals of the EU’s Green Deal. 

The new simplified standards include:

EFRAG has estimated that these simplifications will result in an annual burden reduction of more than 30%. To help companies understand what has changed from previous versions, EFRAG released marked-up versions of each standard. And to help companies gain a better grasp of the entire ESRS ecosystem, they concurrently released a new ESRS Knowledge Hub.

In what will probably be his last action as EFRAG’s Sustainability Reporting Board Chair, Patrick de Cambourg said, “This simplification reflects a crucial balance: supporting Europe’s competitiveness and reducing unnecessary burden, while preserving the EU’s leadership in sustainable finance and its commitment to the Green Deal.”

What EFRAG has achieved in such a short time is truly commendable and it has been an honor to support them. The next step will be for the EU Commission to adopt a Delegated Act to replace the old ESRS with the simplified standards.  As EU Commissioner for Financial Services - Maria Luís Albuquerque - said, Companies can begin to adopt the simplified standards immediately and apply them to their 2026 financial year. 

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Staying in Europe (where I spent this week), after a 6-month investigation, the EU’s Ombudswoman found that the Omnibus simplification process had multiple shortcomings. The report concluded that the lack of stakeholder input and a proper climate impact assessment led to ‘maladministration.’ 

The findings were based on three separate complaints that the EU Commission failed to follow the EU’s “Better Regulation Guidelines” – the principles the Commission is required to follow when introducing new initiatives. Ombudswoman Teresa Anjinho said, “The Commission needs to ensure that accountability and transparency continue to be part of its legislative processes and that its actions are clearly explained to citizens. Certain principles of good law-making cannot be compromised even for the sake of urgency.”  

While these findings are not binding, they could influence how future rules are introduced. In her recommendations, the Ombudswoman stated that future regulations should be “transparent, evidence-based, and inclusive,” and that the Better Regulations Guidelines should be adapted to clarify whether climate impact assessments are always required. 

While some on the left, like Die Linke MEP Martin Schirdewan, are hoping this ruling could reopen the Omnibus, saying, “The Ombudswoman’s investigation makes clear that Ursula von der Leyen’s deregulation agenda clearly violates existing democratic and transparency rules. The Omnibus packages must be reviewed for their democratic and scientific foundations, and all procedures must be put on hold until then.” This is unlikely given the final trilogue votes on the Omnibus and the decision to delay the EU’s Deforestation Rule are scheduled for December 16th.

Over the last three years, Republican-led states, particularly Texas, have been pulling state funds from asset managers that incorporate climate considerations into their investment decisions. The pressure from these states has pushed some of the world’s leading financial institutions to backtrack on climate commitments and exit climate-related groups.

This pressure moved from the states to the federal government last week as Senator Ted Cruz (R-TX) introduced the Stop TSP ESG Act. The bill aims to prevent asset managers who manage the federal employee Thrift Savings Plan (TSP) retirement funds, which hold over $1 trillion in assets, from supporting sustainability policies through corporate shareholder votes. 

Democratic-led states have begun to push in the other direction, for example, 17 Democratic comptrollers penned a letter asking the same asset managers to reaffirm their commitment to assessing climate risks back in August. This week, New York’s outgoing Comptroller Brad Lander urged three New York pension funds to pull $42 billion from three large asset managers for failing “to address climate risk with the seriousness we expect.”

Lander’s final report before leaving office stated “climate risk is financial risk . . . and we need asset managers who attend to the long-term risks in our portfolio.”

If there is one positive sustainability-related outcome of an otherwise dismal 2025, it is that the business case for being green has never been stronger. In a recent Bloomberg report, one analyst actually called it the ‘glory days’ for green investing. 

A new report this week from my company, BCG, in collaboration with the World Economic Forum, “Already a Multi-Trillion-Dollar Market: CEO Guide to Growth in the Green Economy,” revealed that the green economy will continue to grow. Between now and 2030, it is expected to grow from $5 trillion to $7 trillion, making it the second-largest market opportunity after technology.

The report also found that companies currently working in the green economy are outperforming their peers. Since 2020, green revenues have grown twice as fast as conventional revenues, and green companies are attracting better financing. Unsurprisingly, Chinese companies are outinvesting others in the global market and stand to benefit most from the growth in the green economy as things stand. My BCG colleague and co-author of the report, Patrick Herhold, said, “The breadth of commercial opportunities in the green economy crosses industry and regional divides. With $2T in growth expected in the next five years, there are plenty more opportunities for companies to harvest. Our CEO guidebook provides CEOs and their teams a starting point for how.” 

After last month’s bombshell injunction - which paused implementation of California’s climate risk reporting law (SB 261), the California Air Resources Board (CARB) decided to go ahead with the planned opening of the public docket for voluntary submission of climate risk reports on December 1st. 

While the docket remains open, CARB clarified that it will not impose penalties on any covered entities that fail to provide a report by the original compliance deadline of January 1, 2026. Instead, in an enforcement advisory, CARB said it will provide an alternate reporting date after the court appeal is resolved, set for January 9th.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer. 

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